Canada's Housing Bubble

Jonathan Tonge October 2, 2009  americacanada.blogspot.com

Carney and Flaherty marked the second quarter as the end of the recession. In the real world the Canadian economy continued to sink in July.
Canada’s economy was 4.6% smaller in July 2009 than it was in July 2008.
Output of goods producing industries shrunk 13.5% YOY to 317 billion.

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Only five industries saw growth. Everything else was shrinking.

Three out of the five industries that grew were exclusively government services. They included education, public administration, and health care and social assistance. That's not good news when you consider the tax burden these industries place on the shrinking private economy.

Canada's largest industry weighing in at 253 billion dollars is titled 'Finance and insurance, real estate and renting and leasing and management of companies and enterprises'. It saw the best growth year-over-year growth at 2.4%. This industry was by and far the largest recipient of massive stimulus injections from the government – especially in the form of real estate stimulus.

Government backed loans, government mortgage buy back programs, low interest rates, tax credits and generous financing terms has provided banks and real estate agents with record profits. However, if you have an understanding of leverage and the excessive credit that has driven this industry than you will concur that it is by far the most vunerable to a severe downturn in the coming years.

Outside the sphere of government and government stimulus, the Canadian private economy shrunk more than just 5% in the year after July 2008.

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